Zed, which describes itself as a credit-led neobank, has unveiled the Philippines’ inaugural credit card devoid of foreign transaction fees, interest charges, and annual fees. The announcement has been accompanied by the initiation of an early access programme through a waitlist, which has already garnered over 20,000 sign-ups within just two weeks.
Spearheaded by Danielle Cojuangco Abraham and Steve Abraham, alumni of Y Combinator and engineers hailing from Stanford, Zed aims to tackle the problem of credit product access for Filipino Gen Zs. A recent study conducted by TransUnion Philippines revealed a significant gap between the perceived importance of credit among this segment and their access to credit products. Despite 94 per cent acknowledging the significance of credit in achieving financial objectives, only 35 per cent reported adequate access to such services.
Zed aims to bridge this disparity by crafting a next-generation credit card tailored for Southeast Asia, catering specifically to young individuals with substantial incomes but limited credit histories, thus addressing a pertinent need within the region’s financial landscape.
With a team of 10 spread across San Francisco and Manila, Zed strategically divides its focus between product, engineering, and design in San Francisco. In contrast, the Manila team prioritises operations, customer success, and marketing.
The startup has secured US$6 million in funding, primarily led by Peter Thiel’s Valar Ventures.
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So, what sets Zed apart from other digital banks in the region, particularly in the Philippines? Co-Founder Danielle Cojuangco Abraham reveals the details in this email interview with e27.
The following is an edited excerpt of our interview with Abraham.
What specific problem do you aim to tackle for your customers?
If you talk to any Filipino, there is still significant frustration with the complexity, lack of transparency, and bureaucracy embedded in financial services. Only eight per cent of Filipinos own a credit card, largely because it is incredibly difficult to get one if you don’t already have one.
Complicated application processes, tedious documentation, and arbitrary underwriting methods are among the challenges that disproportionately impact young people when applying for their first credit card accounts. Those lucky to get approved face high Annual Percentage Rates (APRs), punitive fees, and a broken customer experience in return. Zed is bringing a differentiated experience to our customers that is simple, transparent and skips all the layers of bureaucracy.
While digital banks in the region have focused their efforts on the unbanked, we are focusing on already banked customers who are tired of facing arbitrary hurdles and friction and are overpaying in fees and APRs when it comes to credit cards. And since we’re truly an independent technology company from day one–not a subsidiary or otherwise tied up with a traditional brick-and-mortar financial institution—we are not carrying costly overhead like physical branches or bloated headcounts.
We’re able to pass these savings on to customers in the form of no revolving interest, no fees, and excellent customer service.
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What is your user acquisition strategy? Is there any insight that you can share about what makes the young professional segment in the Philippines unique?
Almost 30,000 people have signed up organically for our waitlist since we announced it four weeks ago. We have not spent money on marketing or user acquisition to date. This is a testament to how hungry this market is for a financial services company obsessed with the customer experience.
Young professionals are the backbone of the rapidly growing economy, but despite their rising incomes, they are still undervalued by financial institutions. A recent study by TransUnion Philippines showed that 94 per cent of Filipino Gen Zs see the importance of credit and lending products to reach their financial goals. Still, only 35 per cent report having sufficient access to such products.
The failure to access credit cards and build a credit history early ultimately suppresses the next generation’s ability to access more sophisticated, wealth-building financial services in the long term, such as home loans and business loans.
What other product innovations do you have in the pipeline?
Our goal is to reimage what a credit card could be–smarter underwriting, groundbreaking features, no fees, and a revenue model that does not rely on a customer’s failure to pay down their balance.
As we build a credit card for the next generation, we think it is important to create a clean separation between everyday spending and long-term financing activity. Right now, our focus is on building the best possible everyday spending credit card. We will be rolling on long-term financing options later, where customers will be able to opt into financing for specific purchases and receive simple and transparent terms.
We see a significant opportunity in credit cards and will be focused on our single product for the foreseeable future. But obviously, our approach of being obsessed with the customer experience and leveraging technology for young, prime equivalent customers can be extended to other products in financial services.
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What is your major plan for 2024?
While we are optimistic about the market, our plans still revolve around our customers – we will continue to listen to the pain and frustration that our customers face in their financial services experiences and focus our resources on delivering the best possible credit card experience for young, urban Filipinos.
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Image Credit: Zed
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